Coronavirus costs cruise lines $48B in market value

Lengthy quarantines of passenger liners have highlighted coronavirus risks

Cruise line stocks crashed Thursday after President Trump banned European travel to the U.S. for 30 days to stem the coronavirus pandemic.

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Shortly after the prohibition was imposed, Princess Cruises, a unit of Carnival Corp., announced a voluntary pause in global ship operations for 60 days.

Carnival Corp., Norwegian Cruise Line Holdings and Royal Caribbean all dropped at least 20 percent Thursday. The three cruise operators have lost $47.7 billion of market capitalization since Jan. 21, the day COVID-19 was first reported in the U.S, according to Dow Jones Market Data group. Their market value had dwindled to $18.5 billion on Thursday.

"While the cruise industry has seen past cyclical downturns, including recessions and terrorist attacks, Moody's believes that the COVID-19 coronavirus will more significantly pressure the cruise companies' earnings, cash flow, and liquidity as compared to previous cycles,” Moody’s analyst Pete Trombetta wrote on Wednesday.

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COVID-19 has infected 118,332 people worldwide and killed 4,292, according to the latest figures provided by the World Health Organization. The outbreak has caused the Trump administration to ban travel to and from the most heavily impacted regions and led to social distancing.

The cruise industry is among the hardest hit by COVID-19, as the large number of people in a confined space has heightened the risk of transmission.

The outbreak forced three Princess Cruise ships to quarantine passengers while they were tested for the virus. About 700 passengers on the operator’s Diamond Princess vessel were infected, leading to the death of at least six passengers. Another ship operated by Princess had at least 21 passengers who contracted the virus.

The fallout could stretch beyond near-term damage, according to Trombetta.

“With COVID-19 cases increasing exponentially and global countermeasures becoming increasingly severe and restrictive, Moody's sees scope for a significant drop in cruise passenger volumes and net yields in 2020 as well as the potential for a reduction in demand for cruises beyond 2020,” he wrote.

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While the industry has “proven to be resilient following previous challenges” a return to more normal conditions is “likely to take longer than in the past and could alter the trajectory of demand in the industry," he added.